Tesla’s In Trouble

Putin, Powell, and rate hikes, oh my! Anyone hoping for a wild trading session today was undoubtedly pleased as stocks whipsawed every which way in response to the Fed’s afternoon rate hike.

But prior to the hike, Putin got the ball rolling with a morning speech on the war in Ukraine. The Russian president said that he’s moving his military’s 300,000 reserve troops to the frontline. Putin continued, adding that if Russia itself is threatened by NATO forces, nuclear weapons may be used in self-defense.

Stocks didn’t really react to Putin’s statement but it certainly didn’t help matters. The indexes gained modestly through the morning session as bank CEOs addressed members of the House Financial Services Committee.

“there’s a small chance of a soft landing, and then there’s also a chance there’s a mild recession. There’s a chance it could be much worse given the war in Ukraine and all the other global political uncertainties,” Said JPMorgan CEO Jamie Dimon.

“Many Americans are feeling the pain, and consumer confidence continues to drop. I don’t think you can spend $6 trillion and not expect inflation”

Dimon’s words served as a nice “appetizer” prior to Powell’s “main course.” At 2 pm EST, the Fed raised rates by 75 basis points as expected. What came as a bit of a shock, however, was the Fed’s dot plot.

The Fed’s rate expectations jumped significantly, rising to 4.6% for 2023 from the June estimate of 3.6%. The market had priced in a 2023 rate of 4.5% prior to today’s meeting.

Stocks plunged sharply before recovering during Powell’s speech. The S&P was up over 1.3% on the day shortly after Powell finished talking.

The Fed Chairman offered commentary that was perhaps not as hawkish as bulls had feared.

Powell also warned that “the historical record cautions against premature rate-cuts,” and it’s “very likely there will be a softening in the labor market.”

Regardless, stocks ultimately shot lower again as the market digested the most important aspect of the FOMC release (the unexpectedly hawkish dot plot).

The S&P (as represented by the SPY) cratered into the close, falling beneath support at 3,800. A run to the June lows (or even lower) now seems inevitable. The only saving grace for bulls here is that the index is oversold according to the stochastic indicator.

Following today’s dot plot “bombshell,” though, does that really matter?

Probably not. Expect further weakness as the seasonal bearish tendency takes hold.

That makes Tesla’s (NASDAQ: TSLA) current situation particularly enticing for short-term bears. TSLA did very well relative to the rest of the market over the last few weeks. But as of this afternoon, the electric automaker likely set a triple top.

The stock also closed below its minor bullish trend (blue trendline) today and the 10-day moving average.

It has plenty of room to fall, too, before hitting oversold territory on the stochastic indicator.

For those reasons, it might make sense to take TSLA short with a trade trigger of $286.68, below today’s low, as the general market faces a steeper selloff as well.


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